Venu Menon
Wellington, November 25,2023
New Zealand’s first three-party coalition government was hailed as historic by National’s Christopher Luxon, after inking agreements with New Zealand First’s Winston Peters and ACT‘s David Seymour, at the Banquet Hall in Parliament on Friday.
That included the unprecedented arrangement of a shared deputy prime minister role.
“We are doing something historic around the deputy prime minister role. We’ve actually split it. Half the time will be done by Winston [Peters], half the time will be done by David [Seymour],” he told the assembled media.
At the outset, this means that the handbrake will apply to National’s policy of a foreign buyer’s tax, which was eyed as a key source to fund the party’s tax plan.
Instead, the coalition partners will rely on “the policy mix of the three parties” to “generate additional savings.”
That policy mix includes key measures such as “moving fees-free from first year to third year” which would lower the university drop-out rate, not progressing the Working- for-Family Credit, and so on.
But that will not slow investment, particularly in “modern reliable infrastructure.”
While National and ACT have a “very big commitment around city and regional deals, NZ First have regional infrastructure funds. There is very good alignment around that,” Luxon said, adding that NZ First had secured a $1.2 billion regional infrastructure fund.
Treaty Principles
The new government will support a Treaty Principles Bill to Select Committee in Parliament.
Clearly, Luxon has handled coalition partner ACT’s prickly policy priority of a referendum around the Treaty with some dexterity. By tasking trained historian Paul Goldsmith with negotiating Treaty settlements, a hard and protracted process, Luxon has ensured the incendiary issue has enough time to cool off or at least stay on the backburner for a while.
Foreign Affairs
Peters is batting on the front foot for a more proactive foreign policy.
“Foreign affairs does matter to this country, the Blue Continent does matter to this country, the relationship we’ve got matters big time, and we’ve let some of them flag,” he rued.
His observation on China, a key trading partner, indicates a reset is in the offing.
“We expect the Chinese, regardless of their size, to treat us in the same way as we treat Niue. Size doesn’t matter, respect does. That’s all we ask for.”
Coalition differences
Luxon plans to set up a Coalition Committee that will serve as “a clearing house for any tensions or potential conflicts” among the partners.
“We expect direct and upfront conversation between the leaders,” Luxon says, adding: “We have massive alignment around the goals. We have differences of opinion on how best to deliver those. But between the three of us, I’m very confident we’ll be able to work together very constructively.”
The Coalition Committee will see the three leaders, three deputy leaders and the Leader of the House “coming together as a clearing house for any issues that we need to be thinking about in the months ahead.”
Public sector reform
A key objective is reducing public sector spending “by setting headcount targets based on 2017 levels.”
“We want to get the dollars redeployed and actually working hard. We want to get the waste out of the system. That means we are trusting CEOs to say which programmes need to stop…….We don’t want resources wasted on that. We don’t need to replace vacant jobs and you should be mindful of the headcount,” Luxon has admonished a jittery bureaucracy.
That policy initiative has Seymour’s fingerprints all over it.
Tax relief
Nicola Willis, who handles the finance portfolio, has managed to win over both coalition partners into agreeing to deliver tax relief, albeit a modest one, effective from 1 July 2024.
But with NZ First having vetoed the foreign buyer’s tax, Luxon and Willis will have to fund their tax plan by other means.
Attention is now on the half-year update due to be published before the end of the year. Willis’ first meeting with the Secretary to the Treasury may have unexpected surprises in store, with numbers left out of Treasury’s pre-election fiscal update popping up at the meeting. Notably, NZ First’s coalition agreement contains the commitment to reduce Core Crown Expenditure as a proportion of the overall economy.
Reserve Bank of New Zealand
The coalition government aims to return the Reserve Bank’s mandate solely to inflation, with a clearer timeline for targets. The government hopes this will help tackle cost of living. But that will mean getting RBNZ Governor Adrian Orr on the same page.
Restore mortgage interest deductibility
Rental properties will have a 60% tax deduction in 2023-24, 80% in 2024-25 and 100% in 2025-26.
Votaries of this policy might argue that the coalition agreement aligns housing to other types of investment, and thus fills a lacuna. But others may take the binary view that the policy is pro-landlord.
Says ACT’s Seymour, who stewarded this policy: “By making landlords pay more tax, [that] is hurting tenants.”
Reintroduce partnership schools
ACT has managed to get National and NZ First to agree to allow existing state schools to become “partnership schools,” which aims at “improving educational outcomes for disadvantaged students.” This policy would appear to upstage Labour in its social uplift domain.
Abolish Maori Health Authority
This measure aligns with ACT’s goal to remove race as a factor in health delivery.
Bonhomie
Judging by the current bonhomie between the three coalition leaders, it would seem that the pre-election concern that Luxon would be presiding over a Coalition of Chaos is on hold, at least for now.
Venu Menon is an Indian Newslink reporter based in Wellington
